The economic surveillance unit of southeast Asian countries and three of its richest neighbors forecast the region growing 4.7 percent this year in terms of the gross domestic product (GDP) and slower to only 4.6 percent next year.
For the 10-country Association of Southeast Asian Nations (ASEAN) alone, its continued growth was projected to hit 5.1 percent this year but faster to 5.2 percent next year.
The surveillance unit ASEAN +3 Macroeconomic Research Office (AMRO) said the growth outlook on both the 13- and 10-country grouping is underpinned by the region’s high vaccination rate that should help mitigate the health risk posed by the COVID-19 virus.
“Now as we move through 2022, it appears as though the region may finally have gained some ground in its long battle against the virus and we can now look forward to a fully opening-up and strong economic recovery,” AMRO chief economist Dr. Hoe Ee Khor said in a statement.
AMRO’s growth forecast compares favorably against that made by the Manila-based Asian Development Bank (ADB) which projected growth averaging 5.2 percent this year for developing Asia countries and 5.3 percent next year.
For the Philippines alone, the Washington-based International Monetary Fund (IMF) projected growth averaging only 4.4 percent this year from last year’s 5.9 percent.
According to AMRO, while the vaccination rate of countries in the region is sufficiently high, the Russia-Ukraine conflict poses a downside risk to growth in the region: “Its effects are already being felt in the region through higher energy prices. While ASEAM +3 economies have limited direct exposure to Russia and Ukraine, they will not remain unscathed if the war drags on. The economic fallout – disrupted global chains, higher global inflation and lower global growth – would undoubtedly hurt ASEAN +3 exports and growth.”
Growing inflation in the United States and how aggressive the policy response of the US Fed have implications for interest rates, capital outflows and financial market volatility in the region.
“Within ASEAN+3, financial risks are still elevated in many economies due to the pandemic. Macro-financial policies continue to be focused on alleviating the pandemic’s impact on households and firms and supporting an economic recovery. If the recovery is delayed, more businesses and individuals could come under financial stress.
“Given the less supportive global policy settings in 2022, the region’s policymakers will have to undertake a crucial balancing act—avoiding a premature withdrawal of policy support to sustain the recovery, while at the same time facilitating the reallocation of capital and labor to new and expanding sectors and restoring policy space to prepare for future risks.
“ASEAN+3 policymakers will have to be nimble as they navigate this complex environment, strengthen economic recovery, and rebuild policy space,” Dr. Khor stressed.
“This will not be our last crisis. We must rebuild, and continuously innovate and learn as we prepare for the next crisis,” he said.